Kroger 2010 Annual Report Download - page 25

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23
In sum, the Committee believes our management produced outstanding results in 2010, but we
did not achieve our aggressive business plan objectives for sales, earnings, and our strategic plan. The
compensation paid to our named executive officers reflected this fact as the performance-based cash bonus
paid out at 53.868% of bonus potentials. Further, the equity-based portion, the value of which is tied to the
return received by our shareholders in the stock market, grew in value only modestly during 2010. This is
shown in the performance graph appearing at page A-3 of the accompanying annual report.
In keeping with our overall compensation philosophy, we endeavor to ensure that our compensation
practices conform to best practices when identified. In particular, over the past several years we have:
•฀ put฀in฀place฀significant฀stock฀ownership฀guideline฀levels฀to฀reinforce฀the฀link฀between฀the฀interests฀
of our named executive officers and those of our shareholders;
•฀ adopted฀ claw-back฀ policies฀ under฀ which฀ the฀ repayment฀ of฀ bonuses฀ may฀ be฀ required฀ in฀ certain฀
circumstances; and
•฀ eliminated฀tax฀gross-ups.
The Compensation Committee of the Board has the primary responsibility for establishing the
compensation of Kroger’s executive officers, including the named executive officers, with the exception
of the Chief Executive Officer. The Committee’s role regarding the CEO’s compensation is to make
recommendations to the independent members of the Board; those independent Board members establish
the CEO’s compensation.
The following discussion and analysis addresses the compensation of the named executive officers,
and the factors considered by the Committee in setting compensation for the named executive officers
and making recommendations to the independent Board members in the case of the CEO’s compensation.
Additional detail is provided in the compensation tables and the accompanying narrative disclosures that
follow this discussion and analysis.
EX E C U T I V E CO M P E N S A T I O N – OB J E C T I V E S
The Committee has several related objectives regarding compensation. First, the Committee believes
that compensation must be designed to attract and retain those best suited to fulfill the challenging roles that
executive officers play at Kroger. Second, some elements of compensation should help align the interests of
the officers with your interests as shareholders. Third, compensation should create strong incentives for the
officers (a) to achieve the annual business plan targets established by the Board, and (b) to ensure that the
officers achieve Kroger’s long-term strategic objectives. In developing compensation programs and amounts
to meet these objectives, the Committee exercises judgment to ensure that executive officer compensation
is appropriate and competitive in light of Kroger’s performance and the needs of the business.
To meet these objectives, the Committee has taken a number of steps over the last several years,
including the following:
•฀ Consulted฀regularly฀with฀its฀independent฀advisor฀from฀Mercer฀Human฀Resource฀Consulting฀on฀the฀
design of compensation plans and on the amount of compensation that is necessary and appropriate
for Kroger’s senior leaders in light of the Committee’s objectives. In 2009, the Committee retained a
second independent consultant to determine whether the compensation plans and amounts comport
with the Committee’s objectives and produce value for Kroger’s shareholders.